Question

E7-13 Analyzing and Interpreting the Inventory Turnover Ratio [LO 7-5]

Aegis Industries Inc. is the biggest snowmobile manufacturer in the world. It reported the following amounts in its financial statements (in millions):

  

	2012		2011		2010		2009
Net Sales Revenue	$	4,700	$	4,160	$	3,490	$	3,070
Cost of Goods Sold		4,020		3,550		3,050		2,670
Average Inventory		470		420		360		350

  

Required:
1-a.	Calculate the inventory turnover ratio for 2012, 2011, and 2010. (Round your answers to 1 decimal place.)

         

1-b.	Calculate the average days to sell inventory for 2012, 2011, and 2010. (Use 365 days in a year. Use rounded "Inventory Turnover Ratio" and round your answers to 1 decimal place.)

        

2.

Is Aegis performing better than its competitor Sabertooth where the inventory turned over is 6.9 times in 2012 (52.9 days to sell). Both companies use the same inventory costing method (FIFO).

	Yes
	No

Answer 1

1A ) inventory turnover ratio

inventory turnover ratio = cost of goods sold / average inventory

	2012	2011	2010
cost of goods sold	4020	3550	3050
average inventory	470	420	360
inventory turnover ratio	8.5	8.4	8.5

1B )

average days to sell inventory = number of days in a year / inventory turnover ratio

	2012	2011	2010
number of days in a year	365	365	365
inventory turnover ratio	8.5	8.4	8.5
average days to sell inventory	43	43.4	43

2 ) yes